Amerant Bancorp Inc (AMTB) 2025 Q2 法說會逐字稿

Greetings. Welcome to Amerant second quarter 2025 earnings conference call. (Operator Instructions) Please note this conference is being recorded.

I will now turn the conference over to Laura Rossi, SVP, head of investor relations. Thank you. You may begin.

Thank you, Darryl. Good morning everyone and thank you for joining us to review Amerant Bancorp's second quarter 2025 results. On today's call are Jerry Plush, Chairman and CEO; and Sharymar Calderon, Senior Executive Vice President and CFO. As we begin, please note that discussions on today's call contain forward-looking statements within the name of the Securities Exchange Act.

In addition, progresses will also be made to non-GAAP financial measures. This refers to the company's earnings releases or statement regarding forward looping statements as well as for information and reconciliation of non-GAAP financial measures to GAAP measures.

I will now turn it over to our Chairman and CEO, Jerry Plush.

Thank you, Laura, and good morning everyone, and thank you for joining us today to discuss Amerant's second quarter of 2025 results.

You'll notice we continue to evolve our approach to these calls, including refining the slides we will cover today. So Sherry is going to take the lead in commenting on results and asset quality, and I'll wrap up our prepared remarks with some strategic updates in order to allow ample time for humane.

As I noted in our press release, we are pleased to be reporting improved results this quarter, which were driven by higher quarter pre-provision net revenue, along with a lower provision for credit losses. A lot of time and effort this quarter was focused on asset quality, and that will continue to be a top priority for us. Loan growth in 2Q was offset by payoffs and pay downs, and the number of deals we closed in 2Q have yet to fund.

We saw a solid customer deposit growth in light of stiff competition for market share, which we utilize to grow our investment portfolio this quarter. Our new banking centers continue to grow nicely, and we've included the details by banking center and the supplemental slides, and we continue to selectively add key personnel to our team, which I'll comment on later in this presentation.

So with that, let me turn it over to Sharymar now to cover two key results in detail.

Thank you, Jerry, and good morning everyone. Let's turn to slide 3. Here you will see the highlights of our balance sheet. Total assets reached $10.3 billion as of the close of the second quarter. As we got it in the first quarter, we temporarily supplemented loan originations with purchases of investment securities.

Total investment securities were $2 billion up by $209.2 million. Of note, [$120 million] of these securities are mortgage-backed securities, which the company classified as trading securities, and $87 million are available for sale.

The gross loans were down by $30 million to $7.2 billion primarily driven by increased prepayments, which offset loan production in the port, as well as some loans originated there yet months.

On the deposit side, total deposits were up by $151.6 million to $8.3 billion driven by growth in poor deposits. Customer deposits grew by $202.3 million, partially offset by a planned reduction of $51 million in broker deposits.

Our assets under management increased $132.42 million to $3.1 billion, primarily driven by higher market valuations and net new assets. We continue to see this as an area of opportunity for us to grow the income going forward.

Looking at the income statement on slide 4, you will see that we have strong pre-provision and revenue, driven by higher than previously projected net interest incomes and net interest margins. Our net was higher than projected at 3.81% due to recovery of interest on commercial loans, including a non-approval loan that was fully paid off, and another loan that had been fully charged off.

Lower costs of time deposits resulting from lower average balances and repricing rates. And lower costs on seni notes as these were fully repaid in April 2025.

And increases were partially offset by higher average balances of interest bearing demand and money market deposits by prepayments, which offset loan production in 2Q '25, as well as higher average balances in the investment securities portfolio.

Net interest income was $90.5 million of $4.6 million primarily driven by higher average balances of security and lower average balances and rates on time deposits. Provision for credit losses was $6.1 million, down $12.4 million from $18.4 million in the first quarter.

Non-interest income was $19.8 million, while non-interest expense was $74.4 million. Looking back at the guidance provided for non-interest expense for the second quarter, we have guided to $71.5 million. The very to actual results was primarily driven by non-core expenses of $1.2 million. Additionally, we incurred $1.1 million in expenses on customer derivatives, an increase of [$700,000] when compared to the prior quarter.

Reprovision and revenue was higher at $35.9 million in 2Q '25 compared to $33.9 million in 1Q 2025 and core PPNR was $37.1 million, an increase of $5.6 million or 17.7% compared to $31.5 million and 1Q 2025. A reconciliation of core PPNR and the impact on two ratios is shown in Appendix 1 included in this presentation.

Turning to slide 5, you can see improvement across all capital metrics. We paid our quarterly cash dividend of $0.09 per share of common stock on May 30, 2025, and our board of directors just approved a quarterly dividend of $0.09 per share payable on August 30 of this year.

During the second quarter, we also repurchased 275,666 shares at a weighted average price of $18.14 per share. Jerry will cover some additional notes on buybacks and his remarks later in this call.

Next up is slide 6. You can see we made significant improvement in our ROA and ROE disorder at 0.90% and 10.1% compared to 0.48% and 5.3% respectively. Both of these metrics reflect the improved profitability disco.

This quarter, we had $1.2 million in non-routine non-interest expenses, which included an $800,000 loss on the sale of two or a property and approximately $400,000 in salaries and employee benefit expenses in connection with the downsizing of government mortgage.

Our core efficiency ratio was 66.35%, for ROA was 0.94%, and core ROE was 10.49%. Turning to slide 8, here you can see the roll forward of classified loans from the first quarter to the second quarter, showing a net increase of $9.3 million or 4.5% to $215.4 million, primarily due to tertiary loans totaling $21 million downgraded to substandard due to the loss of a tenant and delays in repetition funds.

As well as two commercial loans totaling $16.8 million downgraded from special mention and two commercial loans totaling $18.3 million downgraded from past.

These downgrades were based on receipts of the year in 2024 and 1Q 2025 financials. These increases were partially offset by approximately $50 million in charge off, payoffs, and loans so. Classified loans include nine loans totaling $134 million that remain in occurring status.

Let's move on to slide 9, where we included the roll forward of non-performing loans from the first quarter to the second quarter of 2025, showing a significant net decrease of $41 million, mainly driven by a combination of payoffs, loans sold, paydowns, and charge-offs. It is important to note that the charge-offs included three commercial loans totaling $16 million with $12 million previously in specific reserves.

From an NTA standpoint, in addition to the reduction in NTO, two out of four order properties were sold during the quarter, therefore reducing our order balance to 15 minutes.

Turning to slide 10, we show the roll forward of special mention loans from the first quarter to the second quarter and provide color on the main drivers of these changes. Special mention loans increased by $33 million, primarily driven by three CRA loans totaling $36 million that missed certain milestones. However, there are acceptable mitigants in place, such as adequate loan to value, insurance reserves, personal guarantees, or other structural enhancements.

The increase in special mention loans was also due to four commercial loans in multiple industries, totaling $57 million that great basement received of the year in 2024 and first quarter of 2025 financials. These increases were partially offset by $22 million in payoffs and further downgrades to the classified previously mentioned.

Now moving on to slide 11, which shows the drivers of the $11.7 million decrease in the allowance for credit losses.

The provision for credit losses was $6.1 million in the second quarter. Excluding reserves for commitments, the provision was $3.6 million and was comprised of $6 million to cover the charge-offs, $2.2 million due to macroeconomic factors offset by releases of $1.4 million due to loan growth and $3.3 million due to recovery.

During the second quarter of 2025, there were gross charges of $18.6 million related to three commercial loans totaling $16 million with $12 million previously in the reserves, $1.7 million related to purchase consumer loans, and $1.1 million related to certain smaller retail and business banking loans.

This was offset by $3.3 million in recovery, primarily due to the recovery of $1.9 million related to a commercial loan previously charged off.

Lastly, the coverage of the allowance for credit losses to total loans decreased to 1.2% compared to 1.37% in the first quarter, primarily due to the charge offs of specific reserves. Otherwise, net specific reserves, the ratio remained unchanged at 1.17%.

Turning now to slide 12, I'd like to provide some details on our expectations for the third quarter of 2025. Starting with the deposit slide. We continue to expect 14% to 15% annual growth by year in 2025, even if this is not linear during the third and fourth quarters.

Also note that we plan to further reduce broker deposits by at least $100 million and replace with either official be advances or incremental organic deposit. On the lending side, we expect to evidence loan production and growth of approximately 5% annually per year. In 3Q we project an increase in investment security similar to what we saw in 2Q.

Looking at profitability, we project our net interest margin to be approximately 3.75% for the third quarter. We project non-interest income to be at $17.5 million in 3Q and $18.5 million in 4Q.

Regarding expenses, we expect them to be in line with what we reported as four non-interest expenses for 2Q of $73 million based on recent key additions to the team and investment in continued expansion in Florida.

This is expected to be partially offset by cost reductions in our mortgage. We expect the efficiency ratio to be in the mid 60s, given the investment and growth. And as previously stated, we are prioritizing our way over all other metrics and continue to expect to reach 1% in the second half of 2025. Contingent on any significant macroeconomic updates to be captured by the allowance model in the last quarter of 2025.

And with that, I passed it back to Jerry for additional comments and closing remarks.

Thanks, Sharymar. Finally, turning to the final slide we'll cover, I'm going to provide some color on the topics that we've listed here.

So first, regarding Amerant Mortgage, as we reported last quarter, we've been executing on a plan to reduce the size and scope of our mortgage business, transitioning from being a national mortgage originator to focusing solely on in footprint mortgage lending to support our retail and private banking customer base.

We've been progressively reducing the FDE count toward our stated goal of under 20, and we're in the process of transferring loans on into our core platform. We expect everything to be completed no later than early 42.

Next, regarding where we stand with the opening of new banking centers, we anticipate opening the first of our two new Miami Beach offices in the third quarter, with the second office in Miami Beach, plus our downtown Tampa banking center to be opened in the fourth quarter.

Please note, we've also recently entered into an agreement on a highly visible location in Saint Petersburg, and we anticipate a second quarter 2026 opening there.

While we continue to look for opportunities in the greater Tampa marketplace, you should know this new St. Pete location gives us three of the original six offices that we initially contemplated. But at this point, we're now looking at a longer time horizon and trying to complete the rest of this expansion in 2026.

Let's talk a little bit about new people that we added in the quarter to risk and business development. So on our first quarter call, we announced several key additions to our leadership team, both in risk and business development, and we noted we were going to continue to add talented individuals to both areas again in the coming months.

So in the second quarter, we've added a new head of special assets, and just this week, our new head of credit for CNI started. And both of these talented individuals have strong experience from larger commercial organizations. And on the business development side, we've recently announced the addition of Elliot Shaver, who joined us from Huntington to head up our business development efforts out of our recently opened West Palm Beach regional office.

And joining us in August is our new head of loan syndications and sales, who has a demonstrated proven track record of success at several well-known institutions. We will definitely assist us immediately with our loan growth agenda. As we continue to see new large relationship opportunities that recruit risk management, we need to participate in these deals with other banks.

But wrapping up my comments on talent additions, we have and will continue to selectively look for additions to build to our team, or add to our team, I should say.

Our loan strategy going forward. So on our first quarter fall, we noted that reduced loan growth may result in temporary increases in mortgage-backed securities to offset any shortfalls, and we saw that happen in the second quarter. So, for the second quarter in a row, we were basically flat in loans outstanding quarter over quarter, despite the fact there was a significant amount of activity.

A couple of things are happening here. Please note that asset quality is our top focus, booking a number of construction deals here to date that have not flooded yet, and higher payouts in a projected have all contributed basically to having flat numbers quarter over quarter. So, it's fair to say that rebuilding our momentum will need to come in the second half of 2025.

And a big part of that will be boosted from recent additions we've made, like I mentioned, and there are more in almost all of our regions. So the new head of business development, the new head of loan syndications and sales, along with other additions, RMs in each of our locations, will continue to help rebuild and boost our pipeline.

Let's talk about the continued emphasis we're putting on improving asset quality and reducing non-performing assets.

So regarding asset quality, I think, needless to say, further NPL reductions are a top priority for us right now, and the need to continue to proactively address credit quality is paramount. It's important to recognize that work is also underway on further strengthening our risk culture now that we're a regional bank with the heightened scrutiny that comes with that. The new additions to our team are already contributing and having an impact there.

At last, on prudent capital management and specifically on buybacks. So, with respect to capital management, our intention remains the same as we previously stated. We're going to take a prudent approach which involves carefully balancing the need between retaining capital support our growth objectives compared with buybacks and dividends and enhanced returns.

As Sherry mentioned in the second quarter, we utilize the 10b5-1 plan to purchase shares up to $5 million in the quarter. We expect to continue to prudently repurchase shares depending on trading volume and the price in the third quarter under the current remaining amount authorized.

And in conclusion, please know that we continue to be steadfast in our focus and continuing to execute on our strategy to be the bank of choice in the markets we serve.

So with that, I'll stop all our prepared remarks, and we'll look forward to Cherry and I look forward to answering any questions you have. So, operator, if you would please open the line.

Thank you. (Operator Instructions) Russell Gunther, Stephens.

Hey, good morning, guys. Thanks for taking the question. I wanted to start on the loan growth discussion. I appreciate the color you shared in the prepared remarks. Maybe just bigger picture. I'm thinking maybe in the '26.

Should we be thinking about the guys more in the mid growth range going forward and is this reflective of a strategic refocus or is it more just market driven.

Yeah, hey Russell, thanks for the question.

No, I think you should expect us to be back in double digit growth. We've talked about, very consistently that our deposits first focus is our number one priority. I want to continue to emphasize the quality, the organic growth that we're seeing on the deposit side, and I think as Sharymar refers, we're well into the mid 10s.

You know, on that side. And so that's enabling us to be able, or I should say affording us the opportunity to also grow equally on the loan side. Our expectation is a rebuild of the pipeline and with some of the new additions, and again, I'm not going to elaborate on the number of additions on the RM level that we've made.

But I think our focus, and I said this on the call right now, our focus has been solely, as a top priority on asset quality. But our expectations are there are significant growth opportunities in the markets we serve. And we should be back into higher loan growth in coming quarters and certainly in 2026, but we're going to continue to be very prudent and selective in the additions that we're going to make all time.

Okay, great, thank you Jerry and then just one more for me switching gears on to the asset quality discussion so nice to see the MPAs come down this quarter. Charge offs were a bit higher than at least I was expecting.

So, we also saw a build back in classified and special mention would just be helpful to get a sense for how you guys are thinking about, realized losses in the back half of this year. I think we kind of talked about a 30 to 40 basis point range prior and. I guess just what's embedded in that 1% ROA expectation in the back half of '25.

Yeah. I think the key thing, and Sherry referenced it a couple times in her remarks. We had already provisioned for the uptick that we took this quarter in charge off. So again, the $12 million of the $18 million was already in specific reserves. So if you subtract that and then do the comparison from a charge off rate.

We were relatively flat quarter over quarter. I think we were probably in the 5.5% range last quarter, so roughly 6% and change this quarter, and that's still the core of, again, continuing to see the consumer, the indirect consumer charge-offs and some of the business banking chargeoffs is primarily the key drivers there.

And Jerry too that also in the 1% are way that includes the probation number we do still expect some long roads occurring in the second half of the year, so that is still within the probation expectation because we would have to set up reserves on day one.

Thank you guys for taking my questions.

Stephen Scouten, Piper Sandler.

Great, thanks. Good morning you all. With, extending on that conversation with, as you mentioned, some of the loans that charge off already having specific reserves with this [120] loan loss reserve kind of be the right way to think about. How you need to reserve for the loan book currently?

Yeah, great question. I think that's right in the range, allowance is always going to depend on what asset classes you're growing it, right? And so, I think thinking around the 120, 125 range is probably a good way to think about us, level forward basis.

But we'll record and we'll certainly be talking about where we're growing and what the the reserve requirements are.

I mean, part of this quarter with growth coming from, the quarter definitely benefited, when you think about the flat from a low growth standpoint. You know that that obviously is actually a positive and the growth that we did book came in the investment side right.

But it shares just referenced, the way we look at it is you book the provision alongside with, when you report the growth. So, our expectation is, and as she's mentioned, the provision will tick up a little bit because we expect the low growth to start to come back in.

And then one thing also to add is that we have. As you were able to see the provision doesn't have a component of a funded commitment. So, as we move into funding those notes, you will see a rehab. It's not only our provision, but you're going to see a relapse into the funded portion. But that will impact you.

Sure, that makes sense, yes. And then as you guys, in the third quarter outlook looks like the margin is projected to be, down a touch. Can you walk me through some of the dynamics there?

I mean, given where the loan to deposit ratio has moved down and the expectation for growth to kind of resume, I would actually kind of theoretically thought there'd be incremental upside to the NIM on a positive remix, but maybe you can help me think through those dynamics or where you think the NIM will trend on third quarter.

Sure, so I think the first step, Stephen is to normalize the name because this quarter we had a component related to our recovery and we also had a component related to collection of an NPO.

So if we normalize the name and we think about what would be different in the third quarter, the first thing I would say is we're expecting to have a slightly higher average balances on the wholesale side based on the timing of the maturities within the quarter, and the replenishing of the of that wholesale funding.

But the second thing is related to the securities portfolio where we're going to see a full quarter effect of a higher securities balance that while it definitely is a contribution to NII, it's slightly lower than the average of the NIM. So, once we see that full effect in the third quarter, it takes us to the 3.75%. With that said, we're also working in terms of NPL resolution. So, if we do.

The collection of those items, then it will certainly impact NIMs like it did this quarter. So the 3.75% is guidance towards a normalized NIM.

Okay, and what is that compared to this quarter and forgive me if I missed that, but relative to the 3.81&, what's the kind of normalized name would have been this quarter?

I would say 4 basis points less, more or less.

Okay great. And then lastly for me, there, you noted, a higher around loan syndications and sales head I'm kind of curious how you guys are thinking about that component moving forward if that. It's something where you're desiring to move up market and do some larger loans and kind of if there's a.

Maybe a limit of where you'd say hey at this dollar amount we want to syndicate everything out above this dollar amount or just kind of how we can think about that from a business perspective.

Yeah, no. I really appreciate that question so we can clarify, I think the sense, Stephen, and, one of the nice. things I think that we see in terms of opportunities is we're getting a chance at a lot of significant sized deals and to me, I think that you have to look at this as, number one, it's really prudent risk management if we go to look at a larger size credit, but let's just use for illustration. If you get a $50 million dollar opportunity, it's a great credit, it's really good, and, really well underwritten. We want to hold $25 million of that, right?

And that's kind of where I want to make sure people understand. We're not really looking. At this, by having this position and eventually building probably some support around, earning higher as a growth objective, where you'll start to see we're going to bigger and bigger and bigger, it's just our ability to do more transactions and participate in more transactions gets exponential for us.

And again, from a risk management standpoint, it's very crude for us to be participating. In these deals with a second or even a third bank, right? And so, I think this is part of it.

I'll call a natural evolution of being a becoming a true regional bank. We've had in the past and I know we've talked about this on calls, have had several large exposures, in the portfolio, and our view is just, we've got customers that are growing, it's just another opportunity for us to continue to grow with them as opposed to.

They outgrow us, right? So while we're both growing, this just gives us that lever of where, we can continue to maintain great relationships that we've seen from the very beginning. And, I just think it's like I said, I'll emphasize one more time. It's just really prudent from a risk management standpoint, for a bank our size, we look at things from a capital perspective, spiritual bus.

Yeah. Appreciate that. That's great color, yeah, allowing you to grow and still managing the risk and the concentration. So, like I appreciate all the time.

Okay, thank you.

Michael Rose, Raymond James.

Hey, good morning, everyone. Thanks for taking my questions. Maybe I'll just kind of ask the same question, that I asked last quarter. Jerry, where do you think you are, in terms of the evolution of asset quality?

Maybe we'll use hockey analogy this time since the Panthers just won, but, what period do you think we're in and do you think, I know it's hard to make definitive statements, but do you think we've kind of already reached the peak and criticized classified.

And we should expect, continued progression from here just given, what seems to be an improving, macro backdrop just, from trade deals being struck, everything macro that's seemingly off the worst case. Just wanted to get your view on where we are and how this plays out over the next year or so. Thanks.

Yeah Michael, thanks for the question. Look, I think we put ourselves in a position with the talent we've added to the organization and the approach, and I referenced this around heightened scrutiny that you go through as a regional.

And, I think from our perspective, I wouldn't refer to it as innings or periods as much as I think this is just part of the natural transition for us as an organization.

Around credit quality we are recognizing any concerns that are out there as pro as proactively as we can. And addressing them, and I think, when you hire and have the talent around special assets that we've talked about the additions in terms of leadership and the on the credit side, we're working on this on both sides.

Right? We're looking to always, look at ways to strengthen credit culture. The risk culture in the organization at the same point in time that, we're.

We recognize that it's critically important to make sure that we can get consistency from the results, and we don't want credit bonds coming forward. So, I'm not really ready to tell you one way or another where we are on something.

I would take it that the good news is the non-performing loans continue to come down. We've put the right people in the right seats, and I think that, we're proactively and transparently, we're in a better position today than we were the last quarter and where we've been in the past, and I think that's the really important takeaway that that you should have with this.

Okay, helpful and then just maybe tagging on to that. I mean you obviously brought in some people from some large organizations last quarter. It's been 90 days, I know that it was kind of too early to, lessons learned and maybe some policies, procedures put into place, but if you can just share with us anything that you know has kind of materially changed, from underwriting or or grading or just new production standpoint.

That would be helpful just to get more comfortable on the go forward and what you're putting on the books today. Thanks.

Yeah, I mean, We are looking at, I would call it sort of a Anything that's coming on the books today, and I'll give you a great example, we're making sure, and that's that comes back to the syndications comments, from the last series of questions, making sure that we don't get into a situation where we can't retain credits, right, or that, we're in a position where, taking such a forward look on our underwriting.

I think we're in a better place than we were in the past there. But I also would tell you that. Look, I think the key asset quality ratios that everyone should be looking at with us are non-performing loans.

Because if we dictate that a loan has to go on non-accrual in NPL, I think that's the leading indicator, and I would also say that, one of the things we did not talk about and highlight, and I know the past quarters, people were concerned, right? I think we do think.

That the allowance as it relates to non-performers is a really critical ratio. And we're happy to be back over, 100% coverage there. So look, early identification.

Really, I would say the strengthening and by the way we just talked about adding, a new head of CNI to the team comes from a larger organization in her background, we're excited, for the continuing to build, we don't want the growth for growth's sake.

We want to make sure that we're putting the right growth on, and we think these are all prudent steps to do at this point again because of the transition we're making from being a community organization to being a regional bank.

I appreciate the call Jerry. Maybe just one more switching gears, the last couple quarters have been fairly heavy, in terms of hiring, do you expect the pace to to kind of slow at least on some of the back office non, revenue producing, efforts as we move, into the fourth quarter and as we think about kind of the intermediate term, where do you think from an efficiency standpoint you guys can operate and I'm not trying to ask for kind of.

Longer term targets necessarily, but you know I think you know everyone wants to obviously see these revenue hires, be accretive to the efficiency ratio, but kind of intermediate term, where do you where do you think the company should and can continue to run, just with obviously the pick up and growth but obviously continue to.

Support, revenue growth efforts with additional hires. So just wanted to get a sense for kind of where we're going and kind of what the efficiency could look like kind of intermediate to longer term. Thanks.

Yeah, look, I think, no, and it's a very fair question. Our projections are from, let's call it from an earning asset perspective. If you would look at it sort of on a total asset side, we know that with the hires that we've made, we want to be in the, $11 billion plus range, right?

So I mean $11 billion pretty much gets us. And from an earning asset standpoint, much closer to being a 60% efficiency organization, so, our expectations and Shary referenced in her comments. Right.

We're focused on getting to a 1% ROA, getting to, the 11.5% to12% ROE type of numbers. The efficiency is going to come with that with just increased size. So, I want to go back and address it head on though. Your specific question is we think that the selective hires that we've made are absolutely going to be agreed to us, as part of getting to that $11 billion, right?

And so, I think the other thing, Michael, I take away from the comments that we made this morning. Really important is, we're looking at ways to adopt artificial intelligence to make ourselves more efficient. I also signaled to everyone that, we're going to have a slowdown as it relates to, the physical expansion here.

Because you know we've had it a lot and you know that's already reflected in the numbers that Sherry likes to remind me every day, the second we sign a new lease, we're incurring the expense, it's only the incremental expense, it's actually.

The expense of the people who run the office and so, we're sort of doing a balancing act here. Of, hey, it's we expect more deposit growth, more loan opportunities, more relationship opportunities from these new locations. Our expansion is pretty significant, right?

What we've done so far, and by the way, I highly encourage people to look into the supplemental slides and see the growth that's coming from these new locations. They are already, not only meeting but exceeding expectations, all of them, and we're very excited about that.

And our expectations are that's going to come from these, what I reference is the four editions, the three that will come this year between the third and this 4th quarter and the one that we expect to open in the first quarter of '26.

But if you take a combination of all my remarks there, we're looking at ways to become more efficient, we're scrutinizing expenses to get that efficiency ratio to the 60, and the expectations are a combination of incremental asset growth, the hires we've already made opening the locations we have.

We feel confident that that is, something that is going to be easily achieved with those components all coming together.

Jerry, I appreciate all the color. Thanks for taking my questions. I'll step back.

Absolutely. Thanks, Michael.

Will Jones, KBW.

Yeah, hey guys, good morning.

Good Morning.

Hey Shary, I wanted to circle back on the margin discussion. I know you called out some interest recovery that happened in the quarter, just to help us, normalize that margin. Do you have that dollar amount of recoveries, and then just a follow on to that. I appreciate all the help of color around the guidance and where the margin could be ahead in the third quarter, but.

Could you just remind us from the asset sensitivity standpoint, what, where do you guys kind of stand today and, what maybe a cut or two would do, to the margin as we think about, an exit rate for, 2025. Thanks.

Sure, so in terms of the normalization of the name, I think we should be close to $1.2 million and adding both the recovery and the collection from the from the NPL, so between $1.2 million and $1.3 million and then in regards to the second question about the name for the third quarter, I guess the question would be the components towards the [375]? Just to make sure.

Can I address the question?

Or it was it was really just help us sensitize the margin if we do get a few cuts in the back half of the year what does that do to the margin and just. Any general commentary on your assets sensitivity.

Sure, so at least for forecast purposes we're modeling one cut occurring in September and one in December. So, third quarter wouldn't receive much of an impact from that cut, it would be more seen in the fourth quarter. Typically a rate cut, assuming a full quarter impact would be around $1.4 million to $1.5 million to NII.

Okay, that's great. That's helpful, and then just could you maybe talk us a little bit through the decision to kind of see the securities balances build here, and how you weigh that decision as opposed to maybe paying down some of your, broker deposits or wholesale borrowing, just the decision I guess to build the balance sheet as opposed to, shrinking and make it a little more efficient. Thanks.

Yeah, I think it's not an either or I think we're looking at multiple options. We are considering in the third quarter a reduction of broker deposits depending on the timing of the loan fundings, we would either replace with some wholesale funding or we would actually pay it down and not renew. So, it is a possibility. However, we do see that through the investment portfolio we're.

We're getting a very decent yield from the portfolio still from a risk weight risk weighted asset perspective it's helpful as well and you can see that through metrics like CET1. So, I do believe that we're getting optionality through the securities portfolio we have cash flow optionality so that we can fund the portfolio as the pipeline materializes.

Yeah, well, I think it's not an either or. I think Shary just described it perfectly. We're looking at all options there. I think we signaled that our intent. Is to reduce broker and we're going to continue to look at that as, whether that gets replaced with organic, whether we need to do.

You know, take advantage just given where we are, options around, taking additional advances to offset. I mean, obviously we have a lot of collateral, I mean, billions of dollars, obviously at this point. But, I think we've signaled again. That we view the increases in investments as temporary. Obviously, we want to run the company in the 90%-plus range on.

You know most the deposits we've been very consistent about saying 95% is sort of the optimal target. We're running in the mid to upper 80s right now. I think right at around 86% or so, and we obviously strongly prefer to be funding loan growth right now and that's our expectation is that we'll continue to build back up as we move forward.

Okay, that's a great call. I appreciate that your answer. And then, there just how for you.

I know that you're, very much an organic focused story right now. You're very much focused on building density in the state of Florida, but at the same time there's quite a bit of optimism out there regarding just M&A and what's happened and and maybe more of a deregulatory environment.

Could you just help us recall what where M&A stands and in terms of your, priority list and whether, you feel like that could be an opportunity for you guys. Down the road here, and maybe whether you consider either upstream or downstream M&A.

Yeah, look. I think that's we have said and as you just referenced, organic growth is sort of the top priority and focus for the company, and, I think that will continue to be, but that doesn't mean that as our currency improves, I think that's probably been, and again we've had so many significant projects, right, between system conversions, the additions, the expansion.

That's kind of been the focus, but certainly as we look at the playing field, everything you just referenced, the regulatory environment, our hope for, there's higher returns and from us. That our currency gets better, of course, we'll look at it as an option. But that is not the top focus. Our top focus is continuing to grow and continuing to be the bank of choice in the markets that we serve, right?

So if you think about the opportunities we believe we have, in greater Tampa Bay, Saint Pete, if you look at, the expansion we've done in Palm Beach, our view in Palm Beach County, I should say, I think there's just lots of opportunities for us, you know.

Yeah, that's very helpful thanks for all the color guys.

Okay. Thank you.

Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Jerry Plush for a closing comments.

First of all, let me just say thank you to everyone for joining today. We appreciate it, given the opportunity to share some of our comments and provide some color on second quarter results.

I greatly appreciate everyone's interest in Amerant and your continued support. Have a great day and thanks again.

Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.